Markup

Markup is the amount added to a product’s cost price to arrive at its selling price, usually expressed as a percentage of that cost rather than as a percentage of the final sale price.

Markup is frequently confused with profit margin, but the two are calculated differently. Markup is profit divided by cost, while margin is profit divided by revenue, so the same dollar amount of profit produces a higher markup percentage than margin percentage.

A product costing 10 dollars and selling for 20 dollars has a 100 percent markup, since the 10 dollar profit equals the full cost, but only a 50 percent margin, since that same 10 dollars equals half of the 20 dollar selling price.

Key characteristics

• Based on cost, not revenue: Markup is calculated by dividing profit by the cost of the product, not by the final selling price.
• Always higher than margin: For the same product, the markup percentage is always higher than the margin percentage, since the divisor used for markup is smaller.
• Used to set initial pricing: Markup is commonly used as a starting formula for setting a retail price before other factors are layered in.

Example

A store buys a kitchen tool from a supplier for 10 dollars. To price the product, the store applies a 150 percent markup, adding 15 dollars to the 10 dollar cost, resulting in a final selling price of 25 dollars. The 15 dollar profit represents a 150 percent markup on the original cost, even though it represents only a 60 percent profit margin on the 25 dollar selling price.

Related terms

• Profit margin – a related but distinct calculation that divides profit by revenue instead of by cost.
• Gross profit – the dollar amount of profit that markup is calculated from.
• Wholesale – the supplier-side cost price that markup is added on top of.

Frequently asked questions

How is markup different from profit margin?

Markup divides profit by the product’s cost, while profit margin divides profit by the selling price. For the same product, markup is always a higher percentage than margin.

How do you calculate the selling price from a markup percentage?

To calculate a selling price from a markup percentage, multiply the cost by the markup percentage and add that amount to the original cost. A 10 dollar product with a 50 percent markup sells for 15 dollars.

Why might two products have the same markup but different margins?

Two products with the same markup percentage have different margins if their cost prices are different, since margin depends on the final selling price rather than only on cost. This is why markup and margin should not be used interchangeably when comparing pricing.

AliDropship: An all-in-one platform for starting dropshipping in 2026

AliDropship is a dropshipping platform that covers store creation, product imports, order automation, and marketing within a single system. It is designed for users with no prior ecommerce experience, though it also supports scaling for more established stores.

🛍️ Free turnkey store

New users receive a free pre-built store – set up, designed, and stocked with products. The store includes a ready-to-use product catalogue and a standard storefront design. It also comes with hosting, a domain, SSL, and payment systems already set up and included.

📦 Products

The platform provides access to a product catalogue covering both trending and niche items, with one-click import to your store. The catalogue is updated regularly to reflect current market availability. Products can be browsed, filtered, and added without leaving the platform.

🚚 Shipping & fulfillment

AliDropship provides access to a vast catalogue of products from global suppliers and handles order fulfillment automatically once a purchase is made. Customers receive tracking information directly, and orders are processed without manual intervention from the store owner.

📣 Marketing & promotion tools

The platform includes built-in marketing tools covering email campaigns, discount management, SEO settings, and social media integration. These are available within the dashboard and do not require third-party subscriptions for basic use.

👌 Ease of use

AliDropship requires no coding knowledge. The dashboard contains all the necessary tools for managing your store, products, and orders in one place. Additional features and products can be added as the store grows without rebuilding the existing setup.